Industrial output growth hits 5-month low of 4.1% in March; war impact begins to show

India’s industrial output growth slowed to a five-month low of 4.1% in March 2026, down from 5.1% in February, indicating early signs of pressure from rising input costs and geopolitical disruptions.

Data released on Tuesday showed that while the Index of Industrial Production (IIP) remained in expansion territory, momentum eased towards the end of the financial year, with uneven performance across sectors.

Manufacturing moderates, mining holds up

Manufacturing growth, which carries the highest weight in the index, slowed to 4.3% from 5.9% in the previous month, while mining output rose 5.5% and electricity generation grew 0.8%.

Dipti Deshpande, principal economist at Crisil, said the moderation reflects the early impact of global disruptions.

“Industrial output slowed in March… broadly reflecting the early impact of the West Asia conflict,” she said, adding that “the March data captures only a part of the shock… the deeper impact is expected to show up down the road, particularly in the first quarter of this fiscal.”

She noted that domestic manufacturing is already feeling the pressure of “costlier and tighter supplies of petroleum products and natural gas,” which could weigh further on output.

Mixed sectoral trends

The data showed divergence across industries, with 14 of 23 sectors reporting positive growth.

Sectors such as automobiles, machinery, and basic metals remained key drivers, while textiles, chemicals, electronics, leather, and wood products saw a decline in output.

Madan Sabnavis, chief economist at Bank of Baroda, said the headline number was stronger than expected.

“Industrial growth… was 4.1% for March, which is higher than our expectations of 1–2%. This number is hence impressive given that the core sector growth was negative for the month,” he said.

He added that manufacturing growth at 4.3% was “comforting,” supported by strong performance in capital goods and infrastructure-linked industries.

Consumption remains weak

The use-based classification highlighted persistent weakness in consumption demand.

Consumer durables grew 5.3%, largely driven by automobiles, while FMCG output lagged at 1.1%, pointing to subdued demand in essential goods.

Sabnavis noted that “the consumer goods segment continued to present an ambivalent view,” with electronics witnessing negative growth and broader consumption remaining weak.

Rajani Sinha, chief economist at CareEdge Ratings, said consumption trends remain fragile.

“On the consumption front, growth in output of consumer durables slowed to 5.3%… while non-durables remained subdued at 1.1%,” she said, adding that “urban consumption faces risks from uptick in inflation… while risks of below normal rainfall… pose a challenge for rural demand.”

Risks build, investment holds up

Sinha said the manufacturing sector could continue facing headwinds from an uncertain external environment, even as capital expenditure trends remain supportive.

“The manufacturing sector could continue facing headwinds from the uncertain external scenario… however, the continued strength in infrastructure-related segments remains a positive,” she noted.

Echoing a more optimistic view, PHDCCI said the data points to sustained industrial momentum.

“The March 2026 IIP data reflects a broad-based industrial expansion, led by manufacturing and capital goods,” said Rajeev Juneja, President, PHDCCI.

Ranjeet Mehta, secretary general & CEO of PHDCCI, added: “The strong performance in sectors such as automobiles, machinery, and basic metals highlights improving industrial competitiveness, though subdued electricity growth suggests uneven momentum.”